Tag Archives: logistics

The Mom ‘n Popification of E-Commerce

3 Sep

The e-commerce market in the US has grown at double digit percentages for the last several years despite the general economic slowdown.  This growth is expected to continue as e-commerce continues to take share from traditional retail.  Forrester estimates that  e-commerce will continue to grow at over 10% annually for the next few years and will hit 10% of total retail sales in 2015:

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This growth and other factors like new business models (subscription commerce, direct-to-consumer, etc.) has led to an explosion in new venture-backed startups over the last 5 years.  As some have said, it’s “E-commerce 2.0.”  Birchbox, OpenSky, ShoeDazzle,  ModCloth, NastyGal, Warby Parker, Chloe + Isabel, etc. – just to name a few.  

One trend that I think is overlooked in this mix of new e-commerce startups is what I call the “mom ‘n popification” of e-commerce.  You now have thousands upon thousands of online retailers and small manufacturers-cum-online retailers that are trying to build businesses online.  And unlike their venture-backed counterparts, they are bootstrapped or have taken non-institutional friends and family capital.  

These are the online equivalents to the small, local physical retailers we see all over the country.  Some will perhaps grow into much larger businesses, but the vast majority will either stay small or in some cases grow to medium size through slow but steady growth.  Like their physical retail cousins, they need to contend with their big box WalMart equivalents – Amazon, eBay, Blue Nile, etc.  

In the physical world, retail started as small, highly local businesses.  Even though organized retail concepts like the department store had been around for quite some time, it was only really in the last half of the 20th century where you saw the establishment of big, national chains in American retail.  

The online world seems to be operating a bit in reverse.  Amazon, eBay, Overstock, etc. were the early pioneers starting in the mid 1990s and grew quite rapidly in sales and market cap.  

What’s happened now though is that the barriers for small, “mom n pop” entrants to start selling online have really lowered.  It’s easier than ever for someone without an existing brand and very little capital to start selling online.  I think this is due to many factors:

  1. The growth of cloud services means that there’s now e-commerce infrastructure delivered as a service.  And it’s affordable.  Anyone, for instance, can create their own e-commerce store using Shopify and be up and running with a professional looking storefront in a matter of hours.  There’s affordable SaaS products for dropshipping, managing social referrals campaigns, and so on and so forth.   
  2. Payments – a subset of the above services – has been a particular pain point for people looking to sell online.  Mundane issues like accepting multiple currencies have historically been a nightmare for storefront developers.  These problems are being solved today by Braintree, Stripe, Google Checkout, etc.  
  3. The mainstreaming of using your credit card online.  Everyone transacts online now in the US and levels of trust when buying online are much higher than they were 10-15 years ago.  Simply put, it’s easier for a small, no-name seller to credibly hawk their products online.  
  4. The growth of Google since the early 2000s and the growth in Facebook/Twitter has created huge new channels for online marketing.  There are more opportunities than ever for sellers to get discovered organically or through advertising.  
  5. Finally, I wouldn’t underestimate the importance of free shipping, which was pioneered by Amazon Prime and has become table stakes in many e-commerce categories.  

I expect this trend to continue.  Aggregate e-commerce volume will continue to be concentrated heavily between Amazon, eBay, Walmart.com, and a few other large players.  But I think the long tail of sellers will keep growing.  Also, new categories of e-commerce will open up to smaller players as services like same-day delivery 3PL gain traction.  Most of these companies will occupy small niches, but they can be profitable businesses for their owners and good employers.  

Finally, I’m very bullish on prospects for horizontal players who are providing software or services to the mom ‘n pop e-commerce market.  Shopify, for instance, has a very bright future as a public company, assuming they don’t let an Amazon or eBay buy them beforehand. 

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